600 B.R. 533
Bankr. N.D. Tex.2019Background
- Debtors John and Janet Bryant signed a promissory Note (≈$99,590) secured by a Deed of Trust on their homestead and filed Chapter 11 in Feb. 2017 after falling behind on mortgage payments.
- Franklin Credit Management Corporation filed Claim No. 8 for $157,518.33 as servicer for Bosco Credit II Trust Series 2010-1 (Bosco); claim included the Note, allonges/indorsements, Deed of Trust, assignments, and Form 410A.
- Debtors objected to the Claim on multiple grounds, later narrowing to four: (1) Bosco did not prove ownership/entitlement to enforce the Note; (2) Bosco did not prove it held a security interest in the Property; (3) Franklin lacked authority to file the Claim for Bosco; (4) Bosco failed to prove postpetition interest and attorneys’ fees.
- At hearing Bosco produced the original Note, loan history, testimony from Franklin employees/servicer counsel, recorded assignments of the Deed of Trust, and the Loan Modification acknowledging Franklin as holder/owner and servicer.
- The court found the proof of claim complied with Rule 3001 and entitled to prima facie validity because Debtors failed to produce evidence of equal probative force to rebut it.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Prima facie validity of proof of claim | Debtors: claim calculations incorrect; procedural defects | Bosco/Franklin: claim complies with Rule 3001 and supported by Note, attachments, Form 410A, testimony | Claim entitled to prima facie validity; Debtors failed to rebut |
| 2. Entitlement to enforce the Note | Debtors: Bosco didn’t prove it "owns" or is holder of the Note | Bosco: produced original Note, loan history, servicer testimony; alternatively nonholder-in-possession under Tex. Bus. & Com. Code §3.203 | Even if indorsements excluded, Bosco proved status as nonholder in possession with right to enforce; entitled to enforce Note |
| 3. Security interest in Property | Debtors: Bosco did not prove the Deed of Trust secures the claimed debt; raised "split-the-note" theory | Bosco: recorded chain of assignments of Deed of Trust to Bosco; Loan Modification reaffirmed that Note is secured by Deed of Trust | Deed of Trust assignments establish Bosco is mortgagee with standing; split-the-note argument rejected |
| 4. Servicer authority to file claim | Debtors: Franklin’s counsel lacked authority to file claim for Bosco | Bosco: testimony that Franklin is authorized servicer and to file claims; counsel signed claim as Franklin’s counsel | Franklin had authority as servicer to file Claim on behalf of Bosco |
Key Cases Cited
- In re Fidelity Holding Co., Ltd., 837 F.2d 696 (5th Cir. 1988) (proof of claim filed in accordance with rule is prima facie evidence)
- Simmons v. Savell (In re Simmons), 765 F.2d 547 (5th Cir. 1985) (burden-shifting after prima facie proof of claim established)
- In re Southland Corp., 160 F.3d 1054 (5th Cir. 1998) (treatment of prima facie proof of claim and evidentiary burdens)
- SGK Properties, L.L.C. v. U.S. Bank N.A., 881 F.3d 933 (5th Cir. 2018) (ownership/possession concepts for enforcement of note under Texas law)
- Martins v. BAC Home Loans Servicing, L.P., 722 F.3d 249 (5th Cir. 2013) (party to foreclose need not possess the note itself)